Bonab Steel Industry Complex, which was nearly driven out of business in the last Iranian year (ended March 19), has recently found new vigor following the signing of a cooperation agreement with the world’s largest steelmaker, ArcelorMittal.
According to Babak Alizad, managing director of Bonab Steel Complex, the contract entails the takeover of the Iranian plant’s management, raw material provision, marketing and production operations for five years.
The contract was signed between the Tourism Financial Group, Bonab Steel’s parent company, and the Luxemburg-based giant in London early March.
“This contract was signed with the purpose of acquiring the latest industrial technology, regulating the company’s human resources and production lines, and connecting to regional and global steel markets through ArcelorMittal’s marketing network,” Alizad told our sister publication, Donya-e-Eqtesad newspaper.
Mahan Industries and Mines Development Corporation, a subsidiary holding of Tourism Financial Group, also signed a deal with ArcelorMittal to jointly invest in the exploitation of an iron ore mine in Kerman Province and establish a direct reduced iron production plant as part of the Bonab Steel Complex agreement.
AcrelorMittal’s presence in Iran will not only increase the quality of Iran’s steel products and provide it with high-tech machinery, but it will also boost the country’s competitive edge in regional and global steel markets.
According to Alizad, Bonab Steel Complex is set to start production of carburized steel alloys, used for manufacturing of certain auto parts during the current Iranian year.
“This will be our company’s first step towards exporting quality, high value-added products,” he said.
Alizad emphasized that acquiring modern steel production technologies is going to mean layoffs at Bonab Steel Complex.
“We expect to reach our nominal production capacity and start making profits within a year,” he said.
“The company will consider employing indigenous expert workforce by then.”
Currently, 1,700 people are employed at the steel company.
Bonab Steel Complex, founded in 2005, became one of Iran’s largest private steelmaking companies after a merger with several major hot-rolling and smelting companies.
ArcelorMittal was created after the takeover of western European steelmaker Arcelor (owned by Spain, France and Luxembourg) by Indian-owned multinational steelmaker Mittal Steel in 2006, at a cost of €40.37 per share, worth approximately $33 billion.
Mittal Steel launched a takeover bid that replaced a previous planned merger between Arcelor and Severstal, which had lacked sufficient shareholder approval.
The resulting business was named ArcelorMittal and has been producing approximately 10% of the world’s steel, rightfully earning it the title of being the world’s biggest steel company.
The chief executive of ArcelorMittal is now on the back foot, however, as the powerhouse created by the mega deal is grappling with some of the worst conditions in the global steel market for more than a decade.
The company reported last month that its net losses increased more than sevenfold last year to $7.9 billion. It has now turned to cost-cutting measures by focusing on higher value steel products, such as steel for cars.
